Canadian Natural, which has started up its C$9.7 billion ($8.3 billion) Horizon oil sands project, earned C$305 million, or 56 Canadian cents a share, down from year-earlier C$727 million, or C$1.35 a share.

Excluding such items, adjusted profit fell 17 percent to C$727 million, or C$1.34 a share, from C$872 million, or C$1.61 a share.

Canadian Natural had been expected to earn 86 Canadian cents a share, the average forecast of analysts surveyed by Reuters Estimates.

Cash flow, a glimpse into an oil company’s ability to fund development, was C$1.5 billion, or C$2.80 a share, down 12 percent from C$1.7 billion, or C$3.19 a share, in the first quarter of 2008.

Revenue fell 45 percent to C$2.2 billion.

The company, which has operations in Canada, the North Sea and offshore West Africa, said its results were helped by favorable price spreads for its heavy-grade crude, compared with benchmark light oil, as well as its hedging program.

Canadian Natural and its peers have seen their fortunes dwindle in the past nine months as oil and gas prices tumbled to multiyear lows as demand dropped off amid the recession.

During the quarter, oil prices averaged $43.31 a barrel, down 55 percent from the year before. Natural gas on the New York Mercantile Exchange averaged $4.47 per million British thermal units, down 49 percent.

Canadian Natural has reined in spending as a result, especially in its natural gas operations.

Oil production in the quarter averaged 330,017 barrels a day, up about 1 percent from the year before. Gas production was 1.37 billion cubic feet a day, down 11 percent.

The company said its new C$9.7 billion Horizon oil sands project is now producing 84,000 barrels of refinery-ready synthetic crude a day. The facility is designed to produce 110,000 barrels a day, but it is not expected to reliably hit full output until at least the end of the year,

As well, Canadian Natural said it has come up with a solution to the oil seepage that had cut output at its East Primrose heavy oil project and is working with regulators to solve the problem.

“We believe it is a well-bore issue,” Steve Laut, the company’s president told reporters. “It’s common in the oil and gas business.”

Canadian Natural shares fell C$1.80, or 3 percent, to C$60.34 on the Toronto Stock Exchange, representing a drop of 34 percent in the past year. It released its results after the market closed.

$1=$1.17 Canadian
Reporting by Jeffrey Jones and Scott Haggett; editing by Rob
Wilson